April 14 (Bloomberg) -- Developers in Tokyo’s bayside neighborhoods, where apartments were built on reclaimed land, are halting sales after Japan’s earthquake turned some of the landfill into mud, shattered pipes and severed water supplies.
While most of Tokyo avoided major damage in the March 11 quake because of stringent building codes, in some parts of Tokyo Bay the magnitude-9 temblor triggered liquefaction, a phenomenon where soil loses its strength after violent shaking. The most affected suburb was Urayasu, one of only three residential areas in greater Tokyo where land prices rose last year, and the home of the Tokyo Disneyland resort.
Neighborhoods around Tokyo Bay, which has about 24,955 hectares (61,665 acres) of reclaimed land, are sought after for their views and their travel time of less than half an hour to central Tokyo in a city where a survey by national broadcaster NHK estimated the average commute is 49 minutes.
“The problem is, buyers who bought the high-rise apartments because of the convenience of the bay area’s location and a view of the ocean are now reminded of danger,” said Miyoshi Kaido, a manager at Sanyu Appraisal Corp., a Tokyo-based property appraisal company. “We will see a rising number of sellers.”
Some high-rise seafront residents, who can’t use elevators because of rolling blackouts after nuclear power plants were damaged causing electricity shortages, and bathrooms because of broken pipes, have told real estate agents they’re willing to sell for as little as 50 percent of their purchase price, said Kaido. Half of the households in Urayasu suffered from disruption of water services as pipes snapped, said Rie Sekine, a spokeswoman for the local city council.
The earthquake and tsunami that ravaged the country’s northeast probably will put an end to last year’s recovery in apartment prices in Japan’s capital, said Masahiro Mochizuki, an analyst at Credit Suisse Securities (Japan) Ltd. on April 13. In the Tokyo Bay area, prices may drop as much as 10 percent in just three to six months, he said in an interview.
The average price of a three-bedroom apartment in Tokyo rose to 47.2 million yen ($562,000) in February, according to the Real Estate Economic Research Institute. Monthly prices have remained above the past decade’s 42.8 million yen average in 12 of the past 13 months, the data show.
The number of apartments offered for sale in Tokyo and surrounding areas may drop 25 percent to 2,400 units in April from a year ago as developers withhold sales of some projects, the Real Estate Economic Research Institute said today. The last time April had a lower supply was in 1992 when 1,365 units were sold, said Akio Fukuda, a manager at the institute.
Tokyo Tatemono Co., which has three condominium projects near Tokyo Bay with a total of 1,501 units, said 10 sales centers were closed from March 19 during the rolling blackouts. Half of them were reopened a week later.
Brillia Mare Ariake, a 33-story luxury apartment building developed by Tokyo Tatemono and Itochu Corp. featured the singer Madonna in its 2007 advertisements. Apartments in the high-rise cost as much as 1 billion yen.
“There will always be people who are interested in buying new homes,” said Toru Yamaguchi, a spokesman at Tokyo Tatemono. “We will set our price at a level that’s attractive to those people.”
New homes in Urayasu cost about 100 million yen before the quake, according to a report by Sanyu. Residential land prices in the suburban coastal city, a 20-minute train ride from central Tokyo, rose 1.1 percent in 2010.
Liquefaction, which causes soil to act like quicksand, was found across about 86 percent of Urayasu’s surface land, said the local council’s Sekine. About 112 kilometers (70 miles) of road in the 17 square-kilometer (7 square-mile) city were damaged, she said.
Tokyo Disneyland will reopen tomorrow after closing for more than a month because of disruptions to the power supply from the earthquake, the theme park’s operator Oriental Land Co. said on April 12.
The Topix Real Estate Index fell 0.4 percent 733.26 today in Tokyo, reversing a 1.3 percent gain yesterday.
Sales of apartments including at the 555-unit Inagekaigan and the 52-story Shinonome Tower with 600 units that were scheduled to start in March have been held back until May, said Yoichiro Ishikawa, a spokesman for the developer Nomura Real Estate Holdings Inc. The delay is due to concerns about “buyers’ sentiment” and a later completion date because of a shortage of building materials, he said.
“There were some contracts made after the quake, but there were very few,” Ishikawa said.
Some buyers scrapped plans to buy apartments after areas surrounding the 550-unit Shin-Urayasu and 379-unit Kemigawahama condominiums were damaged, Ishikawa said. The company’s projects weren’t affected, he added.
“The problem is demand in the future,” said Credit Suisse’s Mochizuki in Tokyo. “Some people may not choose to live near the harbor in the near term, even as landfill techniques improved in the past decades.”
Sumitomo Realty & Development Co., Japan’s third-largest developer, will proceed with its 102.8 billion yen plan for residential and commercial projects on a waterfront site in Tokyo Bay while keeping a close watch on the economy, said Kazuyoshi Tanaka, a Tokyo-based spokesman.
Even at half the current price, it would be hard to sell properties in Urayasu because no one would want to buy in the area, said Satoshi Kawahara, president of Real Bois Co., a realtor based in the city.
“I may be smiling but I am really crying inside,” Kawahara said.
The supply of condominiums in greater Tokyo probably won’t reach the 50,000 units the Real Estate Economic Institute estimated before the quake because of a possible slowdown in Japan’s economy, said Fukuda at the Tokyo-based industry publisher. New condominium sales in the Tokyo area rose by one fifth to 44,535 units in 2010, according to the institute.
Developers may be reluctant to lower condominium prices because of the high cost of land and construction, said the Real Estate Economic Institute’s Fukuda. That may result in an increase in inventory, he said.
The number of unsold condominiums was 4,725 units in February. It reached a record high of more than 10,000 units after the global financial crisis, according to the institute.
In the 1995 Kobe earthquake, liquefaction caused many buildings to lean, particularly around the port area of the city 311 miles west of Tokyo on the southern side of Japan’s main Honshu island, said Yasuo Tanaka, a geotechnical engineering professor at Kobe University. Tougher regulations in Tokyo since then helped prevent failures on solid ground in last month’s temblor, he said.
Reclaimed land in Urayasu, which makes up three-quarters of the area, was built of mud and sand over 15 years through 1980. The area may be reinforced by inserting pipes to extract water, installing steel piles, or pouring in concrete, Tanaka said.
The last major earthquake to strike Tokyo and its environs directly was in 1923, when more than 140,000 people were killed, according to the Cabinet Office. The last major one, with an 8.4 magnitude, was in 1854.
Tokyo’s population of about 13 million is adjacent to three major fault lines, including the Nankai Trough, which produces a large quake every 118.8 years on average, according to the Headquarters for Earthquake Research Promotion.
The March 11 quake triggered a tsunami with waves as high as 15 meters (49 feet) that damaged or destroyed more than 200,000 buildings and leveled towns in Japan’s northeast.
“If it was just an earthquake, things would probably go back to normal,” said Mikihisa Hirai, president of Atlas Partners Japan Ltd., which owns more than 2,000 apartments in Nagoya, Osaka and Tokyo and who predicts a drop in waterfront property prices. “With the tsunami, it’s a different story. What’s more of a concern is that with seashore properties, there is nowhere to escape.”
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